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Well-functioning European and international agricultural commodity markets will remain important for food security in Europe and around the world. Besides, sustainable rural communities can benefit from participation in these markets and global agro-food value chains. The world-wide agro-challenges are also formulated at the end of the article.
European agricultural policy, CAP
The EU’s common agricultural policy, CAP has been for several decades and through successive reforms devoted increased attention to the environment. This has led to the current CAP having adopted the so-called “green architecture”, which includes both mandatory elements – to which farmers must adhere in exchange for a full amount of direct payments – and voluntary elements – bringing extra payments for farmers engaging in farming practices that go beyond the basic requirements.
Mandatory requirements, also referred to as ‘conditionality’, include statutory management requirements laid out in different pieces of environmental legislation, but integrated into the CAP. They also include standards for good agricultural and environmental condition of land (the so-called GAECs) that, for instance, require crop rotation or diversification, establishment of buffer strips along rivers and lakes, or minimum soil cover in winter. The GAECs have been at the centre of farmer protests in several EU states in 2024 and were recently amended, reducing their ambition.
CAP vital elements
The voluntary elements include eco-schemes: a major novelty of the current CAP; adherence to the eco-schemes offers farmers a top-up on direct payments if they engage in additional environmentally sound practices. However, as to the existing practices, it all depends on individual EU member states, as they have a significant flexibility in their design. As a result, more than 150 eco-schemes exist across the EU, the most popular addressing soil conservation and biodiversity.
The second voluntary element comprises rural development agri environmental schemes, the oldest environmental measures in the CAP. Also designed by the EU member states, they compensate farmers for cost and income foregone as a result of engaging in environmentally friendly practices, continued agricultural activity in areas where farming is difficult, and restrictions in Natura-2000 areas.
Voluntary elements also include green investments; several studies warn that the EU member states have not been ambitious in implementing the CAP’s environmental measures. It is claimed that states have used the flexibility granted them to define the exact requirements and voluntary measures in ways that have not led to significant change on the ground.
Finding ways to motivate farmers to engage in practices that truly benefit the environment, while ensuring their economic sustainability, remains a major challenge for negotiations on the post 2027 CAP, particularly in the context of widespread farmer discontent.
Reference to EP’s briefing on 17.07.2024 in: https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2024)762360
EU-wide export/import trade in agro-food products
Food and drink, the category that the Eurostat includes in the section of agro-products, during 2023-24 has covered in export €16.6, with the growth rate of -5.7%; in import €12.0, with the negative rate of -1.3%. However, during these years the total agro-trade balance has been at the level of €4.6-5.4.
The general EU trade balance has been at €20.9 bn surplus in trade in goods with the rest of the world in mid-2024, with two main trading partner –the US and the UK (with about € 15 bn trade balance for each).
Source: https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/6-16082024-ap
At the global agricultural market the emerging economies have increasingly driven the growth projections during last 20 years; the trend is expected to continue over the next decade, but with regional shifts linked to changing demographics and new economic affluence.
A notable shift is expected in the coming decade in the increasing role of India, Southeast Asia and Sub-Saharan Africa and the declining role played by China. While China accounted for 28% of growth in global consumption of agriculture and fisheries in the previous decade, its share of additional demand over the coming decade is expected to fall to 11%, attributed not only to a declining population and slower income growth but also to a stabilization of nutrition patterns.
A notable shift expected over the coming decade is the increasing role of India, Southeast Asia and Sub-Saharan Africa and the declining role played by China.
Total agricultural and fisheries consumption in the world (including food, feed, fuel and other industrial raw materials) is projected to grow by about one percent annually (!) over the next decade, with nearly all of the additional consumption projected to occur in low- and middle-income countries. Food calorie intake is expected to increase by 7 percent in middle-income countries, largely due to greater consumption of staples, livestock products and fats. Calorie intake in low-income countries will grow by 4 percent, too slowly to achieve the world-wide Sustainable Development Goal target of zero hunger by 2030.
Source and citations from: OECD/FAO (2024), OECD-FAO Agricultural Outlook 2024-2033, OECD Publishing, Paris/FAO, Rome: https://doi.org/10.1787/4c5d2cfb-en.
Note: The OECD-FAO Agricultural Outlook 2024-2033 is the key global reference for medium-term prospects for agricultural commodity markets; this edition marks the 20th issue of the joint publication. For two decades, the report has analyzed trends in the demographic and economic drivers of agricultural commodity supply and demand, projected the shifts in production and consumption locations, as well as assessed the resulting changes in international agricultural trade patterns.
Global ago-challenges
The following changes are envisioned in the agro-sector around the world in the coming years:
= Cereal demand is projected to continue to be led by food use, closely followed by feed use. In 2033, 41 percent of all cereals will be directly consumed by humans, 36 percent will be used as animal feed, while the remainder will be processed into biofuel and other industrial products.
= Yield challenges are projected to persist for oilseeds, with major producers experiencing slow growth or declines in yield, notably in Indonesia and Malaysia for palm oil, and the EU and Canada for rapeseeds.
= Poultry meat will dominate the growth of the meat sector, primarily due to its relative affordability and perceived nutritional advantages. It is projected to account for 43 percent of total meat proteins consumed by 2033.
= World milk production is projected to grow at 1.6 percent per year over the next decade, faster than most other important agricultural commodities. Most of the growth will occur in India and Pakistan.
= Over 85 percent of the additional projected fish production will stem from aquaculture, elevating its share in global fish production to 55 percent by 2033.
Source: https://www.oecd.org/en/about/news/press-releases/2024/07/Emerging-economies-will-continue-driving-agricultural-markets-over-the-coming-decade-but-with-regional-shifts-projected.html?utm_campaign=What%27s%20New%20-%20July%202024&utm_content=Agricultural%20outlook%202024&utm_term=pac&utm_medium=email&utm_source=Adestra